Lending to first-time buyers dips for second month running

11th November 2014

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Lending to first-time buyers fell for the second month in a row, with 26,800 loans in September, down 3% on August, the latest Council of Mortgage Lenders’ figures show.

The CML said that despite the monthly decline, the number of loans to first-time buyers was still 16% higher than the same time last year.

By value, £4 billion was lent to first-time buyers in September, down 2% on August, but up 25% on the same month in 2013.

Lending to home movers also weakened month-on-month for the second month in a row. In September, the number of loans advanced to movers was 31,700, a 10% fall on the previous month but an 11% increase on September last year.

Remortgaging increased month-on-month in September, with the number of remortgage loans totalling 28,300. This was 20% higher than August but 12% down on September last year.

There were 18,100 buy-to-let loans in September, representing lending of £2.5bn. Following the August low of 15,700 loans worth £2.2 billion, this brought buy-to-let lending to levels near to those seen in July, up 24% by volume and 32% by value on September last year.

In the third quarter as a whole, there were 84,100 first-time buyer loans – 3% up on the previous quarter, and 15% up on Q3 2013.

There were 103,600 home-mover loans in the third quarter, 12% more than the second quarter, and 10% more than in Q3 2014.

Remortgage loans increased by 2% to 77,200 on the previous quarter, but were  down 13% on the third quarter of 2013.

The number of buy-to-let loans was 12% up on the second quarter and 18% up on Q3 2013.

Paul Smee, director general of the CML, said: “We are approaching the end of twelve months of change, transition and growth. This has been a year when lenders and intermediaries have been put under increased spotlight from regulatory, political and media spheres and have risen to meet the challenges.

“The lending market is healthier than it was a year ago, and set to remain so. Remortgaging has returned as a driver of lending volume in the buy-to-let sector. But any fears of over-heating in the housing market are now dissipating as house purchase lending activity seems to be softening.”

Howard Archer, chief UK and European economist at IHS Global Insight, said: “With housing market activity appreciably off its early-2014 highs but still at a reasonable level, we suspect house prices will generally rise at a more sedate rate over the coming months.

“Specifically, we expect house prices to rise by around 5% in 2015 after a likely modest overall increase in the fourth quarter of 2014.”

Archer added: “Looking ahead, significant restraint on house buyer interest  is expected to come from more stretched house prices to earnings ratios, the prospect that interest rates will eventually start to rise in 2015 and tighter checking of prospective mortgage borrowers by lenders.

“Even so, buyer interest in houses is unlikely to fall away with appreciable support likely to come from still high consumer confidence, rising employment, and still low mortgage interest rates (especially as they now look unlikely to rise before mid-2015).”

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